Luke Bailey

You can always enforce a plan's written terms and undo erroneous operations.

Get a copy of the plan's SPD and see if you have met the requirements described in it. It will specify the money type(s) available and the conditions. If you determine you meet all of the conditions, write a letter to the decisionmaker demonstrating your satisfaction of the conditions point-by-point and the sufficiency of your account and demand that they follow the terms of the plan as described in the SPD.

I don't think there's any problem with this under the Code, EBECatty. Probably not a problem under state law either, but that would need to be reviewed.

There is no real definition of the term "fringe benefits" for tax purposes. If the $13k is based at all on his actual expenses, e.g. could be more if his expenses go higher or less if lower, and if the employer views it as a "fringe benefit" and has a consistent policy to do so, then it's probably a "fringe benefit." But if it's a negotiated amount, it could just be additional comp that the employee rationalized based on living expenses. Bottom line, the employer needs to adopt an interpretive policy and be consistent, but it could probably go either way.

The plan document should at least vest authority in the plan administrator to take back control of the account. Is there a provision in the plan that addresses?

Well, that raises the whole issue of elective deferrals and whether anyone would ever want to subject to a real substantial risk of forfeiture, and the effect of that.

waid10, take a look at Prop. reg. sec. 1.457-11(c) and (f). Query whether allowing this would cause your PTO plan to ceased to be a bona fide leave program. Also, the exec would have to be substantially nonvested, so query whether he or she would really want to do that, or whether it would be nonvested if elected.

One solution popular with my clients with similar circumstances is to have a U.S. bank trustee that is directed by a plan committee from the foreign country. See Treas. reg. 301.7701--7(d)(1)(v), Example 5.

Belgarath, I think your analysis is correct, but if that's all they did I'm not sure they are at much risk of having the IRS attempt (or be successful) in disqualifying the plan. Sounds like it would still be compliant as (technically) individually designed.

EBECatty, I think the bonus would arguably have to be both communicated and paid only after plan termination. Otherwise, the bonus paid, say, in December, would be contingent for some on elections made, e.g., in September or October based on knowledge that the bonus would be paid based on the election in place as of October 31. Arguably, it should be OK in all events because does not seem to involve the purpose of the anti-conditioning rule, but who knows. Technically, I think the issue you raised is plausible, so would play it safe. If the bonus is not announced until after the plan is terminated, harder to argue that conditioned on the election. Of course, you may have some disgruntled employees.

oldman63, am I correct that the plan actually has no benefit the calculation of which involves an actuarial factor? If so, and if (I) participants currently vest in employer contributions before NRA, and (ii) a participant has the right to receive his or her account following separation from service, NRA, regardless of what it is, would appear to have no substantive effect in this plan. Is that correct?

007inTraining, if you (I think you're saying this) paid FICA under 3121(v) as the amounts accrued in this and prior years (presumably they were vested then), why are you even asking? FICA's been paid?

oldman63, what is NRA used for in the document, vesting for employer contributions? Eligibility for distributions? Of course, as a governmental plan, ERISA's vesting rules are not going to apply. The Code will merely require that the participants vest at NRA or plan termination. I would share your concern about telling someone age 64 with 10 years of service that they are not going to vested in employer contributions until they have worked another 10 years, but your state law and plan document may be unclear as to whether that would really be a problem. But again, it would be important to understand here what the practical result of the NRA is. Often has very little consequence in a DC plan.

Severance pay is not good 415 comp, so I don't see how you could.

I have gotten emails from individuals in guidance and also from agents working my VCPs, but usually the IRS doesn't like to use email. I think they are worried about spam, hacking, etc. That may be written up somewhere. They usually want to communicate by phone and fax.

I agree with Peter. My position is that the plan let's investors invest in whatever they want and can invest in. If some can't meet the minimum, that is not 401(a)(4) nondiscrimination, but rather a fact of economic life. Technically, the closest you will come, one way or the other, is 1.401(a)(4)-4(e)(3)(iii)(C), which says that the right to a particular "form" of investment is a BRF, and then says employer stock is a particular form. But I don't really think that has the answer to your question, AlbanyConsultant, and there is no further elaboration on it, e.g. in PLRs. The federal securities law (e.g., Reg D), says that you determine qualification of the investor in a self-directed plan based on the participant, and I don't think the IRS would want to take a position that was in conflict (sort of) with SEC.

Hear you, shERPA, but this is one you could be very confident of getting approved. Have them all adopt retroactively, submit to VCP, and then just assume you have it. The longer the IRS takes, the more difficult it would be for it to do anything other than approve, but I think it is extremely unlikely you'd get pushback in any event.

I'm sure Larry is right. Most likely they assumed he was 5% or didn't understand how hard it is to "retire" for this purpose, and now are not admitting they made a mistake.

shERPA, absent egregious bad facts, I think it's an easy VCP, and think that using Rev. Proc. 2019-19 to try to self-correct would be aggressive. The self-correction expansion in 2019-19 is not very well defined, and at some point the IRS will start clarifying the sorts of things that can't be self-corrected through plan amendments under the new guidance, and you might be on the wrong end of the stick when that guidance comes out. When I have represented clients (e.g., small professional firms) with similar facts in the past, we have argued, with some success, that under the applicable state law, which will typically permit closely held companies to have lowered corporate formalities, the PCs had, in effect, adopted by resolution or shareholder meeting. (Hey, with one shareholder, it's easy to have a meeting!) But VCP is probably better than relying on that argument if you don't have to.

So to keep things simple, Austin 3515, say you have two money sources in a non-safe harbor 401(k), (a) nonelective/"profit sharing" and (b) elective deferral. Plan of course has separation from service or age 59-1/2 distribution restrictions for elective deferral, lets you take nonelective/"profit sharing" at any age as long as you are 100% vested. Pre-loan, participant has $50k elective deferral, $50k nonelective/"profit sharing." Takes a loan for $50k. Suppose the plan document does not address where the loan is taken from, but in operation the recordkeeper in next statement shows the loan is allocated 50/50 between the elective deferral and nonelective/"profit sharing," and shows the mutual fund investments also as allocated 50/50, at least immediately after the loan before any new contributions of either type have been made. Suppose they have always done it this way, and do it that way for all other participant loans. Participant is 100% vested and needs $50k cash for some reason. First answer, "Sorry, you have only $25k in your nonelective/"profit sharing." But then you think about it a little more and say, "Well, tell you what I will do. Just for you, I will swap the half of your loan that is in the nonelective/"profit sharing" into your elective deferral, and the half of the mutual funds in your elective deferral into your nonelective/"profit sharing." Then you can clean out the $50k that will now be in your nonelective/"profit sharing." Is that an example of what you are talking about austin3515? I think most plans are going to have language or rules that require the loan to be allocated across all money types, and so the IRS in such a case could argue that your "swapping" was really just a disguised $25k distribution from the elective deferral account. In the absence of any such language, I can still see the IRS arguing that you are stuck with how the TPA operationally allocated it when the loan was disbursed, but don't know if they would win. Or maybe the above is not what you are asking?

coleboy, IRS Notice 2018-99. Very generous if your employees park on premises you own. Good luck.

Agree with justanotheradmin and Lou S.

Yes if the board resolution amounts to a plan amendment, which it probably does, but opinions may differ and would depend on documentation and surrounding facts and circumstances.

I don't think the facts are sufficiently explained to say anything definitive, but (a) a single member LLC is disregarded for federal income tax purposes, which would explain why the larger LLC stopped issuing a K-1 to the single member LLC, and (b) have you run this through an affiliated service group analysis, e.g. IRC sec. 414(m)(2)(A)?

I don't think so, since it is not terminating. However, under Rev. Proc. 2019-20 the plan that results from the merger (aka, "surviving plan") can apply for a DL if the reason for the plan merger was an acquisition-type transaction by the sponsoring employers. The deadline for the submission is the end of the first plan year following plan year in which the employer acquisition-type transaction occurred.